Windows sales lead Microsoft’s results

Software giant’s results in-line despite big launch of new OS

SAN FRANCISCO (MarketWatch) — Microsoft Corp. on Thursday reported a slight decline in its fiscal second-quarter earnings, but revenue that rose from a year ago due in part to strong sales from its Windows operating system, and last fall’s release of Windows 8.

Reuters

Microsoft CEO Steve Ballmer at the Windows 8 launch. The company said it sold more than 60 million licenses for the new operating system since its October.

Microsoft
MSFT, -0.38%
said that for the quarter ended Dec. 31, it earned $6.38 billion, or 76 cents a share, on revenue of $21.46 billion. During the year-ago period, Microsoft earned 78 cents a share on sales of $20.89 billion. Analysts surveyed by FactSet estimated Microsoft would report earnings of 75 cents a share on $21.56 billion.

Microsoft said that its Windows division reported revenue of $5.88 billion, up 24% from a year ago, on strong acceptance of Windows 8, which was officially released on Oct. 26. Microsoft said that to date it has sold more than 60 million licenses for Windows 8.

The company didn’t give any figures for sales of its highly touted Surface tablet, which was also released in October.

“We think of Surface as one part of the overall Windows 8 story,” said Chief Financial Officer Peter Klein, on a conference call to discuss the company’s results. “Certainly this quarter, it was a contributing factor to the revenue growth in the Windows business.”

Colin Gillis, an analyst with BGC Financial, said that despite reports that PC sales are waning, Microsoft showed that “concern about the death of the PC are overdone.”

“They have a lot of very compelling businesses that are continuing to grow,” Gillis said. “We’re still selling close to a million PCs a day, but to focus on Microsoft’s ties to PCs misses how diverse this company is.”

Among Microsoft’s business groups, its Server and Tools division reported revenue of $5.19 billion, up 9% from a year ago, and Online Services sales climbed 11% to $869 million.

The company’s Business Division saw sales slip by 10%, to $5.69 billion, but such sales would have risen by 3% from a year ago when adjusting for the impact of an upgrade offer and pre-sales of the latest version of Microsoft Office.

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Revenue from Entertainment and Services, which included the Xbox videogame console, was off by 11% to $869 million during the quarter which didn’t include any new versions of Xbox.

“Everything was pretty much in line with expectations,” said Kirk Materne, an analyst with Evercore Partners. “Revenue was a bit weak due to MBD [Microsoft’s Business Division] but no major surprises. I expect most folks will want to get an update on Surface and long-term thoughts around gross margins as they push into hardware.”

Microsoft didn’t give any earnings or revenue forecasts for its current quarter. Analysts estimate the company will earn 78 cents a share on $20.67 billion in sales. The closest thing to a forecast came from Klein, when he reaffirmed Microsoft’s full-year outlook for operating expenses between $30.3 billion and $30.9 billion.

Microsoft’s shares fell by 1.4% in after-hours trading following the release of the results.

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